1. PrietoDion Consulting Partners LLC
State & Local Tax Whitepaper
Comparing State Tax Amnesty to Voluntary Disclosure,
Which Program is Best for Resolving State Tax Delinquencies
By Sylvia Dion, MPA, CPA
Page 1
Introduction
Helping companies understand the state tax implications of conducting business activity in new states is a major
focus of mine. If you follow my writings on the various blogs where I write, you know that nexus is a topic that I
write about often. And if you’re familiar with the term “nexus”, then you most likely know that nexus means a
“connection” or a “tie.” In the state tax world, the term nexus is used to describe a threshold that has been exceeded
(in terms of activities in state) which create a state tax obligation in a state. Those obligations may mean a
requirement to pay corporate or other business taxes, collect and remit sales and/or use taxes, withhold and remit
state income tax on the wages of employees who perform services in the state or comply with a state’s other
requirements.
However, the types of activities that can create nexus aren’t always obvious. While activities, such as opening up a
corporate office or retail store, owning property or having resident employees working in a state would all certainly
be activities that exceed a state’s nexus threshold, there are many ‘less than obvious’ activities that can create nexus,
such as sending non-resident employees or independent sales representatives to attend trade shows in a state,
engaging in-state third party marketing affiliates that post a web-links on their instate websites which refers
customers to the out of state businesses’ online store, leasing space on a third party server that is physically located
in a state – some states have nexus rules that apply even if a business has no physical presence in a state at all.
The reality is that there are many activities that can create nexus and it is very common for a business to realize that
they’ve had nexus in a particular state after the fact. And often, because of the complex, non-uniform and often
vague state tax laws that exist, a business may sometimes discover that they have had nexus in a state for many
years.
But what happens if a business has had “nexus” in a state for many years?
Luckily, there are options available for individual and business taxpayers who wish to resolve state tax
delinquencies– State Tax Amnesty and State Voluntary Disclosure.
What exactly are these programs? How do they work? What benefits do they provide? And how does a delinquent
taxpayer participate in one these programs?
Whitepaper Table of Contents:
• Introduction, Page 1
• State Tax Amnesty Programs, Page 2
• State Voluntary Disclosure Programs, Page 4
• Summation, Page 6
• About the Author, Page 7
• Disclaimer, Page 7

2. PrietoDion Consulting Partners LLC
State & Local Tax Whitepaper
Comparing State Tax Amnesty to Voluntary Disclosure,
Which Program is Best for Resolving State Tax Delinquencies
By Sylvia Dion, MPA, CPA
Page 2
In this whitepaper I explain what State Tax Amnesty and Voluntary Disclosure programs are, but more importantly,
I’ll compare and contract these two options and point out what taxpayers should consider before moving forward
with one type of program or another.
State Tax Amnesty Programs
State tax amnesty programs (or amnesty periods, as they are often called) have been quite popular in recent years.
These programs are periodically held by the states as way for states to quickly bring in much needed tax revenue, as
well as a way to add new taxpayers to their tax rolls. As matter of fact, the “amnesty train” has been charging full
steam for several years now and within the past 10 years about one-third of the states have offered some form of
amnesty program. Even individual cities, many of which also have the authority to impose their own nexus rules
and subject businesses to their city taxes, have held tax amnesty programs.
But what exactly is a state tax amnesty program or period? A state tax amnesty is program which runs for limited-
time, during which taxpayers can come forward voluntarily and satisfy their delinquent tax obligations in exchange
for certain benefits, such as an abatement of penalties and some or all of the interest owed. In general, before a state
tax amnesty program (period) can occur, it must be approved by a state’s legislature. Once approved, a state tax
amnesty is administered by the state agency responsible for administering and enforcing the state’s tax laws, (e.g.,
the Department of Revenue, Department of Taxation, Division of Taxation, State Comptroller, etc.)
One of the main benefits of state tax amnesty, the abatement of penalties and possibly interest, can be substantial as
penalties and interest accrue when a tax liability remains unpaid for many years can be significant, and could very
possibly exceed the tax liability itself. Therefore, these abatements help taxpayers retain cash they might otherwise
have had to pay. Filing delinquent taxes during an amnesty also allows taxpayers to come forward with minimal
scrutiny as “eligible” taxpayers need only follow the amnesty “process” which generally requires the filing of all
required returns and payment of delinquent taxes by the amnesty’s deadline. Of course, filing under amnesty also
alleviates the potential negative consequences (notices, assessments, penalties, interest, liens on property, civil or even
criminal investigation) that could result if a taxpayer’s delinquencies are discovered by the state first.
Issues to Consider When Resolving State Tax Delinquencies though State Tax Amnesty
But while state tax amnesty offers many benefits, there are issues that taxpayers need to consider before disclosing
and filing under amnesty. For instance, a taxpayer coming forward during an amnesty period may be required to file
and pay delinquent taxes for as far back as the taxpayer’s liability extends. You’ve likely heard the term “statute of
limitations”, which, for tax law purposes, refers to the maximum amount of time after the filing of a return or the
payment of a tax that the federal or a state government can assess or collect an additional tax, or a taxpayer can file
an amended return or a claim for refund. When a taxpayer has never filed a return for which they liable, the statute
of limitations never begins to “run”. Therefore, in order to be fully compliant a taxpayer may be required to file (and
pay the associated tax) for as many years as the taxpayer is delinquent unless the amnesty program specifies that a
taxpayer only needs to report a set number of prior years or periods.

3. PrietoDion Consulting Partners LLC
State & Local Tax Whitepaper
Comparing State Tax Amnesty to Voluntary Disclosure,
Which Program is Best for Resolving State Tax Delinquencies
By Sylvia Dion, MPA, CPA
Page 3
Some amnesty programs will include
a negative incentive in the form of
an “amnesty penalty” which is
imposed on taxpayers with
outstanding assessments who
choose not to participate in the
current amnesty. A taxpayer who
disagrees with, but is unsuccessful in
protesting the assessment may end
up owing the original assessment,
interest, reinstated penalties, plus
the additional amnesty penalty.
Also, although a taxpayer participating in a tax amnesty can file their delinquent returns during an amnesty period
with minimal scrutiny, the submitted returns could still be audited at a later date. Additionally, taxpayers filing
under amnesty shouldn’t expect that they can “negotiate” for better terms. As I’ll discuss in bit, this is one of the
major differences between an amnesty and voluntary disclosure program (which may permit negotiation).
Another possible drawback applies to taxpayers who have received tax assessments. These taxpayers may be
required, as a condition of participation, to pay the full amount of the tax owed to the state even if they do not agree
with the assessment. Some amnesty programs may also require taxpayers to expressly waive their right to claim a
refund or protest an amount paid under amnesty, thus creating a further dilemma for a taxpayer whose
participation requires payment of the disputed assessment. Additionally, some state tax amnesty programs require
taxpayers who are already in the process of protesting an assessment through the state’s administrative process or
in state court, to formally withdraw their protest, or dismiss any administrative or judicial proceedings.
Here’s another consideration. Some amnesty programs will
include a negative incentive in the form of an “amnesty
penalty” which is imposed on taxpayers with outstanding
assessments who choose not to participate in the current
amnesty program. Thus, a taxpayer who disagrees with a tax
assessment, chooses not to participate in the amnesty, and is
ultimately unsuccessful in protesting the assessment may
end up owing the original assessment, interest, reinstated
penalties, plus the additional amnesty penalty.
Also since amnesties only run for a specified, limited time,
taxpayers may find they don’t have sufficient time to fully
evaluate the pros and cons of participation, or to generate
the funds needed to fully cover the taxes due as the full
amount of taxes and interest (if not abated as part of the
program) must generally be paid in full by the amnesty’s
deadline. Often an amnesty program may only be in effect
for a couple of months and sometimes a State may not
provide a lot of advance notice about the specifics of the
amnesty.
You see, although the state legislature approves an amnesty, the specifics of the amnesty program, such as, the
eligibility requirements for participation and the specific procedures that must be followed, are generally left to the
State taxing agency (Department of Revenues, Division of Taxation, etc.) to determine and administer. For this
reason, amnesty programs can vary widely from state to state. For instance, a state may offer a general amnesty
program, which means that it covers many types of taxes (personal income, corporate income, sales and use, etc.), or
a state may offer a specific amnesty program, one which is targeted at a specific type of tax or specific category of
taxpayers, such as corporate taxpayers or taxpayers who have notified that they can participate.

4. PrietoDion Consulting Partners LLC
State & Local Tax Whitepaper
Comparing State Tax Amnesty to Voluntary Disclosure,
Which Program is Best for Resolving State Tax Delinquencies
By Sylvia Dion, MPA, CPA
Page 4
One common requirement found in most amnesty programs is that taxpayers under criminal investigation for tax
law violations are not allowed to participate (though some amnesty programs will allow taxpayers under
civil investigation to participate). Some amnesty programs may prohibit taxpayers who have been chosen for audit
from participating, but others may include special provisions that allow these taxpayers to participate. As noted
above, some amnesty programs require taxpayers to waive their appeal or refund rights, while others allow
taxpayers to retain these significant rights.
State Voluntary Disclosure Programs
Unless a state legislature has introduced or passed a bill approving a future amnesty, it’s nearly impossible to
predict when a state will offer an amnesty program (period) as amnesties do not generally occur according to any
specific schedule. Often a state or city may not hold an amnesty for many years. For instance, in 2010 the City of
Philadelphia’s held an amnesty program – which occurred 25 years after the City’s previous amnesty. On the other
hand, the state of Massachusetts has held an amnesty program almost every year since 2009.
But waiting for the next amnesty to come along isn’t the best idea, as the longer a state tax delinquency remains
unresolved, the worse the possible consequences become. As I noted above, because the requirements to participate
in a state amnesty vary from state to state, even if an amnesty program does occur it’s possible that a delinquent
taxpayer may not meet the requirements to participate.
But delinquent taxpayers need not wait for an amnesty to occur as there’s another avenue available to taxpayers to
assist them in resolving their state tax delinquencies. A state’s Voluntary Disclosure Program (“VDP”).
These programs, generally administered by a voluntary disclosure unit or designated group within a State Taxing
Agency (e.g., Department of Revenue, etc.), exist in almost every state and are generally on-going. Although an
“eligible taxpayer” can almost always avail themselves of the benefits of disclosing under a state’s VDP, sometimes a
state will suspend its VDP during an amnesty period.
Like state tax amnesty, state voluntary disclosure encourages delinquent taxpayers to come forward and file and pay
their delinquent state taxes. Participating in a VDP generally requires that a taxpayer meet certain eligibility
requirements and enter into a Voluntary Disclosure Agreement (“VDA”) with the state. In exchange for the
taxpayer’s voluntary disclosure, the state agrees to grant the taxpayer certain benefits and protections. The level of
formality of the programs varies from state to state. For instance, while many states may issue a formal binding
agreement (an actual legal contract) signed by a state official and the taxpayer, other states simply send out a letter
communicating to the taxpayer they have been accepted into the program and listing what the taxpayer must
provide. For taxpayers, the primary benefit to entering into a VDA is that it allows a taxpayer to resolve outstanding
tax delinquencies fully and completely under beneficial terms. And although the exact benefits offered under the
various VDPs vary from state to state (and may even vary from taxpayer to taxpayer within the same state), in
general, the primary benefits include a limited “look-back” period and a waiver of all applicable penalties. The “look-
back” period refers to the number of prior years or periods a taxpayer will be required to report and pay tax on. For
example, a three or four year look-back period is common under most VDPs. (Note, Massachusetts is an exception in

5. PrietoDion Consulting Partners LLC
State & Local Tax Whitepaper
Comparing State Tax Amnesty to Voluntary Disclosure,
Which Program is Best for Resolving State Tax Delinquencies
By Sylvia Dion, MPA, CPA
Page 5
One of the most significant benefits to
resolving tax delinquencies through
Voluntary Disclosure is the ability to
request participation in the VDP on an
anonymous basis through a taxpayer
representative, such as a CPA,
attorney, or tax consultant. This
provides an opportunity to negotiate
preferred terms before the taxpayer’s
identity is disclosed.
that some taxpayers may be subject to a seven year look-back period.) Where sales & use taxes are involved, the
look-back period is generally expressed in months, with 36 or 48 months being common. This means that a
taxpayer's tax delinquencies for years prior to the beginning of the state's voluntary disclosure look-back period
would not need to be disclosed or paid. This could translate to significant cash savings in particular if the taxpayer
owed back taxes for many years.
Another significant benefit offered through most VDPs is full
abatement of penalties. As noted above, an abatement of penalties
can also add up to significant cash savings, as accrued penalties can
be substantial when tax liabilities remain unpaid for many
years. Interest, however, is almost always required by the various
state statutes and generally cannot be abated. (Texas is an example
of one state that offers a waiver of interest provided the voluntary
disclosure does not involve a trustee type tax, e.g., sales tax.)
However, one of the most significant benefits to resolving tax
delinquencies through Voluntary Disclosure is the ability to request
participation on an anonymous basis through a taxpayer
representative, such as through a Certified Public Accountant (CPA),
attorney or tax consultant. This provides an opportunity to
negotiate preferred terms before the taxpayer’s identity is disclosed
to the state.
How is this possible? Well, often the first step in the process involves a phone call or a letter to the voluntary
disclosure unit or designated state contact. Because most states do not require the actual name of the taxpayer
during the initial communication with the state, a taxpayer’s representative can ferret out whether the taxpayer will
meets the program’s eligibility requirements and might even be able to obtain a general idea of the benefits the
taxpayer might receive.
Issues to Consider When Resolving State Tax Delinquencies through State Voluntary Disclosure
Just as there potential issues to consider with state tax amnesty programs, there are issues to consider when
deciding whether to resolve state tax delinquencies through voluntary disclosure. States offer voluntary disclosure
as a means of collecting undisclosed taxes that might have never been recovered by the state or that might have only
been recovered through extensive collection efforts. However, another reason states offer voluntary disclosure is
because it brings new taxpayers onto the state’s tax rolls. This is because a typical eligibility requirement of many
VDPs is that the taxpayer not already be registered for the type of tax for which they are requesting a VDA. (There
are always exceptions to the general rule. Minnesota, for instance, offers voluntary disclosure even for registered
taxpayers through alternative, but similar program.) Once a taxpayer is on the state rolls, the taxpayer is then
subject to future filings and audits.

6. PrietoDion Consulting Partners LLC
State & Local Tax Whitepaper
Comparing State Tax Amnesty to Voluntary Disclosure,
Which Program is Best for Resolving State Tax Delinquencies
By Sylvia Dion, MPA, CPA
Page 6
Another issue is that a state may require that the taxpayer either come forward for every type of tax the taxpayer
owes (state corporate income, franchise, sales, use, payroll withholding). Some states also require that the taxpayer
make an affirmative statement that no other type of state tax is owed. (Alabama, for instance, requires that all tax
types to be addressed in the initial written request to enter the VDP or that the taxpayer make an affirmative
statement that no other Alabama taxes are due.) But a taxpayer may not realize that other types of state taxes are
owed. This is because the various state “nexus” rules are complicated, as well as because the nexus threshold is not
the same for different types of state taxes, and a taxpayer may not be aware that his activities in a state have created
a filing obligation and tax liability for other types of state taxes.
Additionally, once a state has accepted the taxpayer’s request to participate in the VDP and has prepared the VDA for
signature, the state may require completion of additional documents such as a nexus questionnaire, registration
forms, or other documents. (Texas is an example of a state that will not process a VD request without the completion
of a nexus questionnaire.) The responses on these “other forms” may be scrutinized by the state, and could
inadvertently subject the taxpayer to other taxes or filing requirements. A taxpayer could end up owing other state
taxes which would need to be resolved outside of the protection offered through a VDA.
Finally, some states, in particular those with structured programs, require that the various steps in the voluntary
disclosure process be completed within short time-frames. For instance, once a taxpayer has come forward, been
accepted into the program, and disclosed their identity, the taxpayer may have only 30 or 60 days to prepare and file
all delinquent returns and pay all monies owed to the state. Because the taxpayer has entered into a legal contract
with the state, failing to comply with all the requirements of a VDA within the state’s timeframe could cause the VDA
to become null and void, thereby extinguishing all the benefits and protections to the taxpayer.
Sylvia's Summation
Well, there you have it! State Tax Amnesty and Voluntary Disclosure – two avenues that allow taxpayers to come
forward voluntarily and resolve prior period tax delinquencies. Which avenue is best? As we like to say in the state
tax world, "it depends". While there are many benefits to resolving delinquencies under both of these options, there
are significant issues to consider too. Whichever avenue is chosen, it’s particularly important to understand the
eligibility requirements, including how quickly returns and tax payments must be remitted to the state and what the
implications of failing to follow-through on these requirements could be. Using a taxpayer representative, in
particular when coming forward under voluntary disclosure, can be extremely beneficial. And using a
representative with extensive experience in the voluntary disclosure process (such as your author here, wink!) is
extremely important as this individual not only negotiates on the taxpayer’s behalf, but is also the primary
communicator with the state voluntary disclosure contact. Establishing a good relationship with the state voluntary
disclosure official can make the difference between a voluntary disclosure that goes smoothly and one that doesn’t.

7. PrietoDion Consulting Partners LLC
State & Local Tax Whitepaper
Comparing State Tax Amnesty to Voluntary Disclosure,
Which Program is Best for Resolving State Tax Delinquencies
By Sylvia Dion, MPA, CPA
Page 7
About the Author
Sylvia Dion, CPA, is the Founder and Managing Tax Partner of PrietoDion Consulting Partners LLC, a State &
Local Tax and Employment Tax consulting practice. Sylvia specializes in assisting U.S. and international companies
with understanding whether their business activity has created nexus for the various types of state taxes and in
helping companies resolve their nexus exposure through the Voluntary Disclosure process.
Sylvia is also a speaker and tax writer whose articles on tax issues and developments have been published in the
Journal of Accountancy, Journal of State Taxation, Journal of Multistate Taxation and Incentives, Journal of Practical
US/Domestic Tax Strategies, Bloomberg BNA State Tax Weekly, Bloomberg BNA Multistate Tax Report, the Institute for
Professionals in Taxation (IPT) Tax Report and e-Commerce Law & Policy. She is also the author of “Minding
Massachusetts”, a quarterly column on Massachusetts tax developments, published in State Tax Notes, a Tax
Analysis publication.
Sylvia is also an avid tax blogger who covers ‘Internet Sales Tax’, ‘U.S. Sales Tax for Foreign Sellers’, and
‘Massachusetts Sales Tax’ for SalesTaxSupport.com and is a tax contributor for AllBusiness.com. Sylvia is quoted
frequently on state tax issues, and has been quoted in Forbes.com and BloombergBusinessweek. For more about
Sylvia and PrietoDion Consulting Partners LLC, visit her firm’s company website at www.sylviadioncpa.com
Disclaimer: The content provided in this whitepaper is for informational purposes only, and is not a substitute for legal,
accounting or tax advice. PrietoDion Consulting Partners LLC is available to discuss your specific facts and circumstances and
assist you with disclosing during an available Tax Amnesty program, represent you in the Voluntary Disclosure process or
discuss other alternatives. If you’re interesting in learning more about our capabilities, please contact us at
info.prietodiontax@gmail.com. You can also contact Sylvia Dion directly at sylviadion@prietodiontax.com, or
sylviadion@verizon.net or at 978-846-1641.